Hospice care buzz: H.I.G. and THL double down

THL agrees to invest in Martis Capital's Care Hospice and InTandem Capital fields final bids for Cano Health.

Happy Thursday!

As anticipated, lots of healthcare deals are in their final stages or getting done as we speak. It seems GPs are as eager to sign up their deals as I am to fast forward to 2021.
Hospice craze

This week, more than one notable deal in hospice care traded hands at a mid-teens EBITDA multiple, setting new precedents in a sector that has historically produced low-teens multiples.

That includes Thomas H. Lee Partners getting back into the hospice business (remember Curo Health Services?), agreeing to invest in Martis Capital’s Care Hospice. Just a couple days earlier, I wrote that Vistria Group’s St. Croix Hospice had selected H.I.G. Capital as its new owner in a $580 million deal. Read more.

The premium valuations and robust interest can be attributed to a number of factors.
To start, scarcity value. Care Hospice and St. Croix were among few remaining platforms of scale available for investment, and now, those who missed out are likely to shift their attention to Webster Equity’s Bristol Hospice, sources have said. (The other sizable player is Summit Partners’ Abode Healthcare.)

More importantly, end-of-life care possesses several attributes deemed attractive by the private equity community. “The consensus has been really rock solid,” one source said, as businesses have proved strong performers through the crisis, with minor, temporary dips in performance.

What the pandemic has done is catapult community- and home-based businesses to the forefront like no other lobbying group has been able to do, another person familiar with the deals added.

“A lot of PE saw that and said ‘we need to be in community-based care; that’s where the puck is going.’”

If you think about what hospice care is, it’s a substitute for very expensive treatment in the last days or months of one’s life, where a patient might be in the hospital. Hospice care is considered both extraordinarily cost efficient for the health system, and it’s also patients’ preferred setting for end-of-life care.

Further, hospice care is steady as far as reimbursement goes, and the M&A playbook is very much alive for existing platforms. The industry remains fragmented, is professionalizing, and there’s a multiple arbitrage opportunity with hospice care add-ons still trading around 5x to 6x, sources said.

Elsewhere in post-acute care, Medicare home care has been quiet this year, whereas the Medicaid home- and community-based providers have seen a lot of action. (Recall Help at Home and Simplura?)

Top Scoops
InTandem Capital Partners is fielding final bids this week for Cano Health, whose primary care clinics are tailored to seniors in the fast-growing Medicare Advantage market. Check out my story to find out who’s in the running and more.

As always, write to me with any comments, tips or just to say hello.